-In the above figure, the economy is at point A. Then the price level falls to 90 while the money wage rate does not change. Firms will be willing to supply output equal to
A) less than $16.0 trillion.
B) $16.0 trillion.
C) more than $16.0 trillion.
D) Without more information, it is impossible to determine which of the above answers is correct.

Question

-In the above figure, the economy is at point A. Then the price level falls to 90 while the money wage rate does not change. Firms will be willing to supply output equal to
A) less than $16.0 trillion. 
B) $16.0 trillion. 
C) more than $16.0 trillion. 
D) Without more information, it is impossible to determine which of the above answers is correct.

Quizplus · Accepted Answer

When the price level falls and the money wage rate remains unchanged, the real wage rate increases. This typically leads to firms being less willing to supply the same level of output, as their costs in terms of real wages have increased, leading to a decrease in output supplied.

-In the Above Figure, the Economy Is at Point A Then